Corporate Finance and Cost of Capital

All calculations must be shown. For problems that have an Excel template, be sure to download the template from the publisher's web site, and save as an Excel file.
Chapter 9: Problem 25 (template is available)
Chapter 10: Problem 4 (template is available)
Chapter 12: Problems 5 and 7 (both chapter 12 problems have a template)

Chapter 9, #25:
Calculating Investment Returns - You bought one of the Bergen Manufacturing Co.'s 8 percent coupon bonds one year ago for $1,028.50. These bonds make annual payments and mature six years from now. Suppose you decide to sell your bonds today, when the required return on the bonds is 7 percent. If the inflation rate was 4.8 percent over the past year, what would be your total real return on investment?

Chapter 10, #4:
Portfolio Expected Return - You have $10,000 to invest in a stock portfolio. Your choices are Stock X with an expected return of 14 percent and Stock Y with an expected return of 9 percent. If your goal is to create a portfolio with an expected return of 12.2 percent, how much money will you invest in Stock X? In Stock Y?

Chapter 12, #5:
Calculating WACC - Millineaux Corporation has a target capital structure of 55 percent common stock and 45 percent debt. Its cost of equity is 16 percent, and the cost of debt is 9 percent. The relevant tax rate is 35 percent. What is Mullineaux's WACC?

Chapter 12, #7:
Finding the Capital Structure - Fama's Llamas has a weighed average cost of capital of 11.5 percent. The company's cost of equity is 16 percent, and its cost of debt is 8.5 percent. The tax rate is 35 percent. What is Fama's debt - equity ratio?

PART B:
Read about "The Cost of Capital for Goff Computer, Inc"

Question: (#4 in the text)
You now need to calculate the cost of debt for Dell. Go to www.nasdbondinginfo..com , enter Dell as the company, and find the yield to maturity for each of Dell's bond. What is the weighted average cost of debt for Dell using the book value weights and the market value weights? Does it make a difference in this case if you use book value weights or market value weights?